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Topic: Tax Strategy Based on My AGI (Read 967 times)

I'm married filing jointly, and for 2017 I estimate my AGI to be $169k after contributing the max ($18k) to my 401k. My employer will contribute $7k.

I've got extra money and I want to know where to put it! Note I do not have an HSA and can't get one. Could/should I:

1) Put $11k into Roths for both my husband and I ($5,500 each, he is unemployed) since I'm phased out of contributing to a trad IRA?2) Put $19k after-tax contribution into my work 401k to hit the $44k limit? Would plan to roll over the contributions to Roth and the earnings to trad IRA once I "retire"3) Just invest in an after-tax account

Can I do both 1 & 2 or does the $11k count towards the $44k limit??? That's one area I'm really confused on.

I'm married filing jointly, and for 2017 I estimate my AGI to be $169k after contributing the max ($18k) to my 401k. My employer will contribute $7k.

I've got extra money and I want to know where to put it! Note I do not have an HSA and can't get one. Could/should I:

1) Put $11k into Roths for both my husband and I ($5,500 each, he is unemployed) since I'm phased out of contributing to a trad IRA?2) Put $19k after-tax contribution into my work 401k to hit the $44k limit? Would plan to roll over the contributions to Roth and the earnings to trad IRA once I "retire"3) Just invest in an after-tax account

Can I do both 1 & 2 or does the $11k count towards the $44k limit??? That's one area I'm really confused on.

If DH has been unemployed for the whole year, he can put $5500 into a traditional IRA. Given your income, unless you have a great pension already vested, traditional is probably better than Roth. See IRA Deduction Limits | Internal Revenue Service.

I'm married filing jointly, and for 2017 I estimate my AGI to be $169k after contributing the max ($18k) to my 401k. My employer will contribute $7k.

I've got extra money and I want to know where to put it! Note I do not have an HSA and can't get one. Could/should I:

1) Put $11k into Roths for both my husband and I ($5,500 each, he is unemployed) since I'm phased out of contributing to a trad IRA?2) Put $19k after-tax contribution into my work 401k to hit the $44k limit? Would plan to roll over the contributions to Roth and the earnings to trad IRA once I "retire"3) Just invest in an after-tax account

Can I do both 1 & 2 or does the $11k count towards the $44k limit??? That's one area I'm really confused on.

If DH has been unemployed for the whole year, he can put $5500 into a traditional IRA. Given your income, unless you have a great pension already vested, traditional is probably better than Roth. See IRA Deduction Limits | Internal Revenue Service.

Wouldn't their AGI be too high to get a deduction for the traditional? The Roth would diversify your future tax risk and provide tax free growth moving forward.

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I'm married filing jointly, and for 2017 I estimate my AGI to be $169k after contributing the max ($18k) to my 401k. My employer will contribute $7k.

I've got extra money and I want to know where to put it! Note I do not have an HSA and can't get one. Could/should I:

1) Put $11k into Roths for both my husband and I ($5,500 each, he is unemployed) since I'm phased out of contributing to a trad IRA?2) Put $19k after-tax contribution into my work 401k to hit the $44k limit? Would plan to roll over the contributions to Roth and the earnings to trad IRA once I "retire"3) Just invest in an after-tax account

Can I do both 1 & 2 or does the $11k count towards the $44k limit??? That's one area I'm really confused on.

If DH has been unemployed for the whole year, he can put $5500 into a traditional IRA. Given your income, unless you have a great pension already vested, traditional is probably better than Roth. See IRA Deduction Limits | Internal Revenue Service.

Wouldn't their AGI be too high to get a deduction for the traditional? The Roth would diversify your future tax risk and provide tax free growth moving forward.

AGI appears to be too high for OP to deduct an IRA, but not for the unemployed husband, assuming said husband has been unemployed / otherwise not covered by an employer-sponsored plan for the whole year.

In this situation, both OP and husband have the same MAGI (presumably $169K - no mention of the things you'd add back to get there from AGI, so lets go with that). Same MAGI for both, but different MAGI limits for tIRA deduction. So for OP, the limit for a full deduction is $99K (2017) - obviously OP does not qualify. For unemployed husband, the limit is $186K. So you could go traditional for husband and Roth for OP with that first $11K.

I'm married filing jointly, and for 2017 I estimate my AGI to be $169k after contributing the max ($18k) to my 401k. My employer will contribute $7k.

I've got extra money and I want to know where to put it! Note I do not have an HSA and can't get one. Could/should I:

1) Put $11k into Roths for both my husband and I ($5,500 each, he is unemployed) since I'm phased out of contributing to a trad IRA?2) Put $19k after-tax contribution into my work 401k to hit the $44k limit? Would plan to roll over the contributions to Roth and the earnings to trad IRA once I "retire"3) Just invest in an after-tax account

Can I do both 1 & 2 or does the $11k count towards the $44k limit??? That's one area I'm really confused on.

The overall 401(k) limit is $53k, not $44k. The limit includes your contributions and any employer matching, but does not include any IRA contributions.

Oops I was wrong about the limit - it's $54k, not $44k. And I think our MAGI would be $187k ($169k+$18k that went into 401k already)? I'm new to all these numbers.

I'm assuming that we'd file jointly, and I found the following for filing jointly: "For married couples filing jointly, where one spouse's IRA contribution is covered by a workplace retirement plan, the income phase-out range for 2017 is $99,000 - $119,000." I think this rules out the trad IRA for both of us. :(

Also to clarify, husband was employed for part of the year but did not participate in a 401k. He could have, but didn't. Anything else that's unclear?

I'm assuming that we'd file jointly, and I found the following for filing jointly: "For married couples filing jointly, where one spouse's IRA contribution is covered by a workplace retirement plan, the income phase-out range for 2017 is $99,000 - $119,000." I think this rules out the trad IRA for both of us. :(

Nope. That's the range for the spouse who is covered. The non-covered spouse will be OK. See links given in previous posts.

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Also to clarify, husband was employed for part of the year but did not participate in a 401k. He could have, but didn't. Anything else that's unclear?

Check the link about being covered by a retirement plan (it's within the links given previously) to ensure he is "not covered" this year. So far so good (based on your quote here) but there are other considerations.

AGI is well-defined and unambiguous: it's the number at the bottom of the front page of your Form 1040.

MAGI, on the other hand, means different things in different contexts. It is literally your AGI modified by adding or subtracting different things from it. There are a few different places in the tax code where you might have to calculate a MAGI. IRA eligibility and Obamacare subsidies are two that people commonly look at, and they each use a different formula!

For the purpose of the IRA MAGI, pre-tax 401(k) contributions don't count.

Yes, absolutely. Compared to a taxable account, getting that money into a Roth account eliminates annual dividend taxes and capital gains tax when you sell. It comes with some small strings attached, mainly a pretty hefty tax if you withdraw more than your contributions before you're at a "normal" retirement age. If you don't expect to need to dip into the earnings early, it's a great deal.

Another reason to do a megabackdoor Roth is I think anything that gets money out of taxable accounts and into IRA's and/or 401k may also afford you some legal protections in that I don't think that money can be touched in a bankruptcy or legal action against you.